TURKEY PLEASED WITH ISRAELI CABINET APPROVAL OF

C O N F I D E N T I A L ANKARA 000149

SIPDIS


E.O. 12958: DECL: 01/08/2014
TAGS: ECIN ETRD IS PREL SENV TU
SUBJECT: TURKEY PLEASED WITH ISRAELI CABINET APPROVAL OF
TURKISH WATER IMPORTS


REF: TEL AVIV 127


Classified by Economic Counselor Scot Marciel for reasons 1.5
(b) and (d).



1. (C) Turkey is pleased with the decision (reftel) of the
Israeli Cabinet to approve the broad outlines of the sale of
fresh water from Turkey to Israel. MFA's Transboundary
Waters Chief, Mithat Rende, said that Israeli working level
officials had been in Ankara recently to agree on the text of
the framework agreement, and Turkey is ready to sign.
Details on who will sign and when have not been decided,
however. Rende said the signing of the agreement will be a
big step but confirmed that the framework agreement is little
more than a statement of intention. The important -- and
difficult -- details have not been addressed and will take
considerable time and effort to resolve. Nevertheless, he
expected the water deliveries to commence in 2006.



2. (C) Turkey has about 5 billion cubic meters of fresh
river water that flows unused each year into the
Mediterranean. The deal with Israel to deliver 50 million
cubic meters per year for 20 years is just a drop in the
bucket. The water will come from the Manavgat river in the
middle of Turkey's Mediterranean coast. (Rende emphasized
that some Arab countries have accused Turkey of wanting to
sell transboundary water, i.e. from the Euphrates River, to
Israel. The Manavgat is wholly within Turkish territory.)
Turkey built a water treatment plant and loading facility on
the Manavgat in 1997, and now intends to privatize the
facility. Rende said the facility, which cost $147 million,
would require some upgrades, bringing the total cost near
$200 million. In addition, transport of the water will
require a private company to build and operate three
specially-built tankers, with the capacity to transport
250,000 tons of water each. He estimated the cost of the
tankers at between $180 and $200 million.



3. (C) The Israel deal is part of a long-standing Turkish
dream to develop a "Peace Pipeline" delivering water to the
parched countries in the Middle East (from the Gulf States to
North Africa). Turkey hopes that the deal with Israel will
encourage other water-starved countries in the region to
follow suit. Rende noted that the framework agreement will
allow Israel to sell the Turkish water to its neighbors.
Rende said that Israeli Public Works Minister had suggested
that the deal with Turkey could evolve into a regional
concept.



4. (C) In a related effort, Rende said that Turkey will
proceed with a plan to build a $500 million submerged
pipeline to deliver fresh water to Northern Cyprus, with the
option of extending the line to include Greek Cyprus.



5. (C) Rende would not speculate on what price Israel would
pay for the water. He noted that the Turkish water will be
more expensive than desalinated water, saying that Sharon's
decision was political. He said the GOT had not decided what
"royalty" price Turkey would ask for the water. The more
difficult issues involve the private companies operating the
water treatment and loading facilities in Turkey and the
transport operator. Without including other operating costs,
if the companies wanted a reasonable 15% return on their
total upfront cost of about $400 million, they would need to
bring in annual revenues from the water sales of about $64
million, which translates to a cost of $1.28 per cubic meter.
With the Turkish 'royalty" and operating costs included, the
water could easily be triple the price of desalinated water
in Israel.


Baghdad minimize considered.
DEUTSCH